What's up with oil prices? Well, it's not speculators, and there's no relief in sight, meaning at least five more years of high prices with no easy fixes. The ugly truth? Peak oil isn't fringe anymore--it's going mainstream.

That's the reading from the latest oil market report from the International Energy Agency, the rich-country energy watchdog. The IEA's latest x-ray of the oil market includes plenty of disturbing nuggets.

The fact that there are no growing stockpiles of crude around the world, for example, suggests speculators aren't behind crude's dizzying rise this year (much to Paul Krugman's satisfaction and Congress' chagrin.)

And while U.S. drivers fret and worry over how to pay for the Prius, the sad truth is that it doesn't matter: By 2015, developing country oil demand will outstrip the rich world's. They're already in the driver's seat: 90% of the demand growth over the next five years will come from Asia, the Middle East, and Latin America, the IEA said.

But the juiciest nugget? The conservative IEA appears to be inching ever-closer to the "peak-oil" crowd. Supply simply can't keep pace with demand--everybody with an oil well has the taps open, but there's not much left in the keg. Oil fields are aging quicker than free-agent pitchers, and the global oil industry has to run faster just to stay in place.

So where's that fresh supply going to come from? As the IEA noted, Saudi Arabia is the only country with a glimmer of spare production capacity--and the jury is still out on that. Increased domestic drilling, the U.S. energy agency already said, would be but a hiccup in the global market. Non-OPEC countries, from Norway to Mexico, are expected to chip in just 1.2 million barrels per day of new crude by 2013, IEA head of market analysis Lawrence Eagle said--or less than half the global shortfall.

Politicians can pick their bogeyman--be it speculators, OPEC, or Democrats. But more and more it seems like the oil connundrum boils down to an age-old truth: Finite supplies can't meet infinite demands.

"Like alchemists looking for a way to turn basic elements into gold, everyone wants a simplistic explanation for high prices,"

Ours explanation is pretty simple: there is just not that much oil on Earth. The amazing thing is how far people would go to deny that.

I read somewhere that Plato once said that people are annoyed when the truth is simple. But I could not google up this formulation...

The International Energy Agency (IEA) has forecast that the world's oil supply will rise more slowly than expected over the next five years, potentially leading to continued high prices.

As a result, it predicts there will be little spare oil capacity on the market by 2013.

The IEA's assessment of the next five years looks at expansion projects underway in the oil business and likely increases in demand for its products.

The IEA says 3.5 million barrels a day of new production is needed each year - more than most individual countries produce - just to make up for declining production from existing oil fields.

According to the IEA, spare capacity is likely to increase over the next two years but after that, with rising demand, it is likely to decline to minimal levels.

If that prediction is right the implication is that prices are likely to remain high.

- BBC

If sanity be culturally normative, then by the norms of this culture I claim insanity.

Wasn't "Supply and Demand" a simplistic enough explanation for prices? Or is the invisible hand only believable as a good thing, and for bad things we need a more classical, personified scapegoat?

When the capital development of a country becomes a by-product of the activities of a casino, the job is likely to be ill-done. — John M. Keynes

And why would the IEA have to comply with that?

When the capital development of a country becomes a by-product of the activities of a casino, the job is likely to be ill-done. — John M. Keynes